As our clients transition to this new contract format, we gathered three key members of the Maynard Marks team to discuss the fundamental changes in NZS 3910:2023 and how these will impact project collaboration and management.
Contributors: Robert Kulaszewski - Chartered and Registered Quantity Surveyor, Mark Williams - Project Manager, a member of the Society of Construction Contract Practitioners and Independent Certifier; and Frank Watson, Registered Quantity Surveyor and Independent Certifier.
The NZS 3910:2023 standard contract marks a significant evolution in how construction is managed in New Zealand. With an emphasis on refining cost management along with different parties’ roles and responsibilities, the new standard aims to streamline processes, reduce disputes and foster better project outcomes.
New Cost Mechanisms
A notable addition to NZS 3910:2023 is the Target Price mechanism for managing the contract value. Robert Kulaszewski, Quantity Surveying Lead at Maynard Marks, explains that whilst this concept is new to NZS 3910, it is prevalent in other contracts like the UK's New Engineering Contract (NEC). “When implemented effectively, Target Price contracts align the interests of all parties, fostering collaboration and enhancing risk management. This leads to better transparency, and potential savings for clients.”
Another key change is a new mechanism for agreeing the final contract price, through an Interim Final Account and Final Account process, allowing a clear, two-stage process for project closure. Robert notes this encourages timely, amicable financial agreements. Importantly, these accounts cannot be submitted as Payment Claims under the Construction Contracts Act, giving parties the flexibility to negotiate without the typical pressures of interim payment claims.
Contractor Indemnities
Previously a grey area, the new standard introduces significant changes to contractor indemnities. Fault-based indemnities are now clearly defined, offering better transparency, and reducing the potential for disputes.
Mark Williams, Maynard Marks’ Project Manager, and Independent Certifier says, “the approach essentially aims to provide a balanced framework for managing liability and protecting each party from the inherent and sometimes obscure risks in contracts.”
NZS 3910:2023 also establishes indemnity and liability caps, however, Mark notes, “it may still be necessary to address specific conditions related to a contractor’s insurance coverage to align with these caps.
“Often this knowledge only comes from having seen or experienced the same or similar circumstances in the past, highlighting the value of appointing a seasoned professional who has experience implementing robust construction contracts.”
Role Changes and Improvements
Finally, the most critical change in NZS 3910:2023 is the introduction of the Independent Certifier (IC) and Contract Administrator (CA) roles. The previous version, NZS3910:2013, combined these functions under the 'Engineer to the Contract.' Now, the Contract Administrator represents the Principal, providing instructions to the Contractor, whilst the Independent Certifier serves as an impartial decision-maker, evaluating variations, granting time extensions, and issuing completion certificates. This separation aims to reduce conflicts of interest and enhance fairness in the decision-making process.
Frank Watson a highly experienced Independent Certifier, views this change positively, noting, “The separation between roles offers a more balanced strategy. Clients can have greater confidence that the contract is being managed effectively and fairly, and that there is a clear delineation between the two roles.”
Frank adds that whilst one person can still fulfil both roles – common for smaller projects - clear communication about what role they are performing at any given time is essential.
A further enhancement to the contract is the new role of Advisors (engaged by the Principal) that can also replace more junior support given by Engineer’s Representatives previously.
A Tool for Success
Ultimately, NZS 3910:2023 represents a significant advancement in construction project management in New Zealand. By providing clearer guidelines, enhancing transparency, and reducing disputes, it sets the stage for improved project outcomes.
Robert, Frank, and Mark emphasize that understanding and adapting to these contract changes is crucial for all stakeholders, regardless of project size. Yet, whilst the new contract framework is a valuable tool, the real key to successful project delivery lies in fostering a positive project culture and collaboration among individuals. Whilst contracts can support a positive culture, it is great people, not great contracts, that drive successful outcomes
The Maynard Marks’ team includes a number of contract management experts, who can fulfil Independent Certifier, Contract Administrator and Engineer to Contract roles.
If you have any enquiries regarding the NZS 3910:2023 changes, or need support on your project’s contract, contact our team below.
Mark Williams - mark.williams@maynardmarks.co.nz
Robert Kulaszewski - robert.kulaszewski@maynardmarks.co.nz
Frank Watson - frank.watson@maynardmarks.co.nz
